Disasters hit APN earnings

The Queensland floods and Christ­church earthquake will depress
APN News & Media
’s June-half earnings and negate some of the improvement the company is achieving in its outdoor advertising and radio divisions.

The trans-Tasman media company said the natural disasters would cut its March-quarter earnings before interest and tax by $9 million, with the Queensland floods eroding earnings by $6 million and the Christ­church earthquake cutting them by about $3 million.

A weaker exchange rate was expected to trim earnings from its New Zealand division by $1 million (APN reports in Australian dollars).

Brett Chenoweth, the former Telecom New Zealand, Village Roadshow, ecorp and ninemsn executive who succeeded
Brendan Hopkins
as APN’s chief executive on January 1, was unavailable for comment yesterday.

A statement from APN said its Australian and New Zealand radio businesses “continue to show strong growth and to date are ahead of both budget and the prior year".

“It is extraordinary to experience two major natural disasters in two distinct geographies in one quarter.

“Although the Queensland economy is still volatile, it is expected that Queensland will recover and return to its strong growth trajectory.

“Despite its current weakness, the New Zealand economy is forecast to return to growth in 2012. Additionally, the Reserve Bank of New Zealand has recently reduced interest rates and other moves to stimulate the economy in the short term are likely."

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APN shares rose 3¢ to $1.54 yesterday. They have fallen from $1.78 over the past month, in part, because of investors’ concerns about the impact of the two disasters.

In late February, APN, which is 32 per cent owned by Irish company Independent News & Media, said the Queensland floods would cut its earnings for January by $3 million.

Yesterday, it said the impact of the flood had “moderated" during February and March, to about $3 million in those two months, and would continue to moderate during the June quarter.

APN said a “range of initiatives are being actively pursued so as to limit the impacts of the weaker New Zealand economy".

APN executives would not speculate on the company’s likely earnings in the current half. The company reported earnings before interest and tax of $87.1 million for the June 2010 half and full-year calendar 2010 earnings of $205.4 million.

Before yesterday’s announcement, RBS Equities and Macquarie Group were predicting APN would report 2011 earnings of $226.6 million and $222.2 million respectively.

Other analysts were less optimistic: Merrill Lynch forecast full-year earnings of $212 million and Deutsche Bank predicted $211 million.

Last month, Morgan Stanley analyst Andrew McLeod said the weak New Zealand economy was not APN’s only problem and claimed its New Zealand Herald was losing classified ad revenue to Trade Me, which is owned by Fairfax Media, the publisher of The Australian Financial Review.

Mr McLeod said APN’s key problem was “negative structural change"; that is, the drift of readers and revenue from newspapers to the internet. “It’s the same in developed metropolitan newspaper markets around the world. All that varies is the rate of change."

In February Mr Chenoweth said he was keen to expand APN’s digital media business.

“Online and digital thinking is important to any media business these days. I don’t think many decisions are made in the media industry without thinking about the implications of digital media."